2% Rule(s)

[hilmy83]

It's stupid in that the 2% AUM is completely random, namely it can be anywhere on the chart. What if it's just above the trendline or support/resistance? In that case, it will surely get hit and you'll be stopped out. It would be much better to place it under the trendline even if it's more than your average 2% rule.

Bruh, your % risk will be fixed regardless of where you place your stop. I think you're confusing % price move with actual risk

 

[hilmy83]

How do you figure out how many shares you will trade?

Two percent represents the number of shares* your stop width. Set your stop width to be under the trend line and figure out how many shares you need to make the risk 2percent.

Lol I thought I was the only was confused by his response

 

[schizo]

How do you figure out how many shares you will trade?

Two percent represents the number of shares* your stop width. Set your stop width to be under the trend line and figure out how many shares you need to make the risk 2percent.

Okay, my bad. So you're actually talking about "max loss" rather than "stop loss". Yeah, it's the brain fog.

 

[murray t turtle]

Using some arbitrary $ or % for stops is pretty stupid. It should be placed strategically around major reversal zones, such as support/resistance or trendlines, to name just a few. For instance, consider this chart of AAPL. It's still trading in an uptrend. You want to stay with the trend until it breaks below the trendline.

View attachment 314727

%%
Agree on US dollar stop on that chart maybe be stupid.[NOT an anti Fed reserve statment LOL
BUT since you noted it LOL,$ 147or $145[USD] are excellant stops if one like good 2023%% exits.
WHY/ because theyre close prices below weighted 200dma/200 EMA. 2% loss on AUM sounds like not much sense; even if it excluded money market part. SPY benchmark is a cash measure, same with S&P 500 or 505.Could make 2% work in a bull market, APPLE more than AUM.
Even less sense if one has has cash ETFs+ some leveraged mixed, using 2%AUM, private money .
Maybe i should not note this, since i dont use your trendlines, but i dont overweight open prices much /its a false sell signal on your2023 chart anyway\7th candle from your close,
And 7th candle did not close above your trendline.......... Good chart

 

[Handle123]

Smaller the account, larger the risk. As account grows along with knowledge, total risk gets down to zero on some forms of trading.

 

[Dollardogs]

I was about to post a similar question: Maximum loss of total equity per trade. If I have $100,000 in my account, am I insane to try any strategy which requires risking over 2% per trade (2,000)? Bearing in mind I'm a daytrader, not a swing trader, but I currently cap my full losses much lower than that (under 1%) and I have a max of 2 full losses per day, so currently my worst case scenario is 2% drawdown per day. Is 4% drawdown per day just too risky?

 

[TheMordy]

Is 4% drawdown per day just too risky?

5 bad days = -20%. Two bad weeks = -40%. Can you afford that ??

 

[Dollardogs]

5 bad days = -20%. Two bad weeks = -40%. Can you afford that ??

In a row, of course not, but my system tends to be a fairly reliable 65% win rate. I've yet to have more than 2 full losses in a row since I implemented it, however, that's only a few months back. Related question: is there a golden number for the amount of time at which point you can trust your win rate?

 

[Businessman]

Risk more after you have booked profit.

Start by risking 0.25% to 0.5%

After you make some profit, increase your risk to say 0.75%. Then eventually 1% and over when you have an even bigger profit base.

 

[TheMordy]

Related question: is there a golden number for the amount of time at which point you can trust your win rate?

Its not a golden number, it's the golden cycle.
If your system worked well over:
1) bear market 2) bull market 3) bear trap 4) bull trap 5) inflation 6) recession.
That's the parameter in my opinion.